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The Use of Enterprise Units in Crop Insurance

The 2008 Farm bill provided for an alternative level of crop insurance subsidies for Enterprise Units relative to Basic and Optional Units. As you can see in Table 1 the subsidy for enterprise units are sometimes as much as 20% higher than for the same coverage with basic and optional unit structures.

Coverage Level

Basic & Optional

Subsidy %

Enterprise Unit Subsidy %

50%

67%

80%

55%

64%

80%

60%

64%

80%

65%

59%

80%

70%

59%

80%

75%

55%

77%

80%

48%

68%

85%

38%

53%

A brief review of unit structures is as follows:

Basic unit – All insurable acreage of the insured crop in the county on the date coverage begins for the crop year: (1) In which a producer has 100 percent crop share; or (2) Which is owned by one person and operated by another person on a share basis.

Optional Unit – Subdivision of basic unit.

Enterprise unit – All insurable acreage of the same insured crop or all insurable irrigated or non-irrigated acreage of the same insured crop in the county in which a producer has a share.

Importantly, because enterprise units are aggregated from basic units the base rates for enterprise units are generally lower than for the basic units from which they are aggregated. Thus, higher subsidies and lower rates lead to significantly lower producer paid premiums for enterprise units.

A review of RMA participation data from 2009-2016 reveals the choices farmers have made. The results are reported by crop. For the six major row crops enterprise units have covered at least 27% of acres since 2009. However, it appears enterprise units are far more popular for corn and soybeans than the other four crops. More than ½ of corn and soybean acres have been insured with enterprise units. In contrast, ½ of wheat acres have been insured at the optional unit level.